<\/p>\n
Tech advantages always prove short lived in the stock markets, report suggests.<\/p>\n
The global asset management industry will be able to wring a number of benefits from generative artificial intelligence (AI) \u2014 but beating the markets won\u2019t be one of them, according to Moody\u2019s Ratings.<\/p>\n
While there are many areas of the fund management business that may be able to enjoy greater efficiencies with the help of AI, the rating agency argues that the technology won\u2019t enable sustained market outperformance.<\/p>\n
\u201cThe fundamental nature of markets is that for every winner there is a loser,\u201d the agency said in a report. \u201cOutperformance in the stock market is a zero-sum game.\u201d<\/p>\n
Historically, the adoption of new technology has been unable to create a persistent advantage in markets, the report noted.<\/p>\n
\u201cThose that gain an edge one year will typically lose out another and past technological advances have been unable to change this dynamic,\u201d Moody\u2019s said.<\/p>\n
While AI will enable firms to automate a variety of tasks in areas such as product manufacturing, distribution, administration and compliance, when it comes to portfolio management, any technological advantage will ultimately prove temporary, the report said.<\/p>\n
\u201cAI-enhanced asset management will eventually achieve \u2014 once costs are subtracted \u2014 an average return of slight index underperformance,\u201d Moody\u2019s said.<\/p>\n
Distribution and back-office administration are the areas of industry where the potential for gains from AI is likely the highest, the report suggested.<\/p>\n
But, even there, \u201cimplementation costs could be high and efficiency gains will need to be large to offset them.\u201d<\/p>\n
The prospect of AI-powered cost savings will be more beneficial for active managers, which have higher operating costs to start than passive managers, and will be most rewarding for firms that can implement the technology cost-effectively, the report said.<\/p>\n
\u201cThe enduring impact and real value of AI in asset management will \u2026 be in enhancing customer experience, personalizing investment solutions and efficiency gains via automation,\u201d Moody\u2019s added.<\/p>\n
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